The U.S. International Trade Commission (ITC) proposed this week a rules change that may rein in patent trolling efforts by foreign firms. Under the new rules companies filing patent complaints will have to prove they have a "significant" presence in the U.S. before any preliminary injunctions (bans) are ordered. Previously, this establishment of a "domestic standard" of enforcement was performed after the case concluded.

The smartphone patent wars have highlighted the growing use of ITC injunctions to damage competitors via import bans. That practice stems from the 2006 Supreme Court ruling in eBay v. MercExchange [PDF], which made it harder to ban products due to infringement findings in federal court. Companies quickly realized that instead of federal courts, they could simply use the ITC to do their bidding (or banning, in this case). As the majority of commercial goods in the U.S. today are manufactured overseas or use parts that are manufactured overseas, such bans are highly effective in most cases.

The change should have little impact on ITC complaints from the smartphone industry -- for better or worse -- as most OEMs like HTC Corp. (TPE:2498) or Samsung Electronics Comp., Ltd. (KSC:005930) have significant domestic presences. Rather, it should impact smaller firms from overseas who hold U.S. patents, but do not sell products or market in the U.S.

The ITC has become a popular avenue for product bans. [Image Source: Wikimedia Commons]

Critics might view the plan as setting up barriers to free trade and offering favoritism to U.S. corporations over small overseas patent holders.

But many top U.S. tech corporations praised the change. The ITC Working Group -- which includes representatives of Avaya Inc., Broadcom Corp. (BRCM), Cisco Systems Inc. (CSCO), Google Inc. (GOOG), Hewlett-Packard Comp. (HPQ), Intel Corp. (INTC), and Oracle Corp. (ORCL) -- called the shift significant.

ITC Working Group Executive Director Matt Tanielian commented, "Addressing this will require more than administrative fixes, but the pilot program is a step forward that could help limit costly and unnecessary patent cases."

A more serious change could be in the works if Congress (or the ITC itself) considers a rules change proposed by the White House, which would make it as hard to institute an ITC ban as a federal court ban.

At first glance, it seems the easy approach would be to move the patent system to WTO, as they should be regulating trade. But they are only as good as the commitment of the participating countries. And if the participating countries gets into a trade war by adding boundaries, WTO can't do much.

Not to mention, the process of patenting will be grinding to halt due to red tape and bureaucracy.

When they were teaching this whole land, labour, capital and entrepreneur in school, our professor used to say, that due to globalization and free movement of three of these components, markets should be constantly correcting the prices as we reach equilibrium through employment across the globe. Its 21st century, and we are still going in circles.

Perfect, now you must be American or substantially American to hold a US patent. In other words, US patents have no legal basis when held outside of the US.

I await the matching European patents have no legal basis when held by American companies Directive by the EU. Have to stop all the patent trolls so fair is fair!

This entire move is a simple trade barrier to make damn sure foreign companies are incapable of seeking US patent protection. I trust the Republicans are up in arms over this disgraceful regulation of the world free market.